Question

tom bond borrowed $6,600 at 6 1/2% for three years compounded annually. what is the compound amount of the loan and how much interest will he pay on the loan? compound amount = $7972.47 (round to the nearest cent as needed.) compound interest = $ (round to the nearest cent as needed.)

Explanation:

Step1: Recall compound - interest formula

The compound - amount formula is $A = P(1 + r)^t$, where $P$ is the principal amount, $r$ is the annual interest rate (in decimal form), and $t$ is the number of years. Here, $P=\$6600$, $r = 6.5\%=0.065$, and $t = 3$. The compound interest formula is $I=A - P$.

Step2: Calculate the compound amount

$A=P(1 + r)^t=6600\times(1 + 0.065)^3=6600\times(1.065)^3=6600\times1.207949625=\$7972.4675\approx\$7972.47$ (already given).

Step3: Calculate the compound interest

$I=A - P$. Substitute $A = 7972.47$ and $P = 6600$ into the formula. $I=7972.47-6600=\$1372.47$

Answer:

$1372.47$